Question

Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,000 units at $38; purchases, 8,000 units at $40; expenses (excluding income taxes), $184,500; ending inventory per physical count at December 31, current year, 1,800 units; sales, 8,200 units; sales price per unit, $75; and average income tax rate, 30 percent.

Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. (Do not round your intermediate calculations.) Inventory Costing Method FIFO LIFO Units Average Cost Cost of Goods Sold Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold

Answer 1

FIFO method states that goods purchased first are sold first
LIFO method states that goods purchased later are sold first
Weighted average method uses average cost for the purpose of calculation
Under periodic method, all records are updated at the end of the period and not after each transaction.
	Units	FIFO	LIFO	Average Cost
Beginning Inventory	2,000	76,000	76,000	76,000
Purchases	8,000	320,000	320,000	320,000
Goods available for sale	10,000	396,000	396,000	396,000
Ending Inventory	1,800	72,000	68,400	71,280
Cost of Goods sold	8,200	324,000	327,600	324,720
Average cost per unit = Goods available for sale/Units
=396000/10,000 = $39.6 per unit
Income Statement
	FIFO	LIFO	Average Cost
Sales Revenue	615,000	615,000	615,000
Less: Cost of Goods sold	324,000	327,600	324,720
Gross Profit	291,000	287,400	290,280
Less: Operating Expenses	184,500	184,500	184,500
Income before tax	106,500	102,900	105,780
Less: Taxes	31,950	30,870	31,734
Net Income	74,550	72,030	74,046
FIFO for net income since highest
LIFO for income taxes since lowest
LIFO for net income since cost of goods sold will be lower
FIFO for taxes